A growing mismatch between public expectations and actuarial reality on life expectancy could leave millions facing a significant financial shortfall in retirement, according to new analysis from consultancy BW.
The data, which builds on BW’s At Retirement Reckoning report, reveals that men typically underestimate their life expectancy by four years, while women fall short by as much as seven. This disparity is leading many to under-save for retirement, assuming they will need income for fewer years than they are statistically likely to live.
Most people believe they will live to around 82, but in reality, actuarial models drawing on real pension scheme data — adjusted for distortions such as the COVID-19 pandemic — show men are more likely to live to 86, and women to 89. The result is a stark mismatch between retirement planning and actual need.
Jack Carmichael, associate and senior longevity actuary at BW, said: “The gap between expectations and reality on life expectancy is yet another seismic hurdle in the way of solving the gender pensions gap. Millions of savers are heading into retirement with unrealistic expectations and inadequate savings. Women in particular are facing a perfect storm: longer lives, smaller pension pots, and a far greater risk of running out of money.”
The financial implications are severe. Someone drawing £5,000 a year from their private pension — on top of their state pension — would aim to save £85,000 to cover a 17-year retirement from age 65 to 82. But if they live to 86, that requirement rises to £105,000. For women living to 89, it climbs to £120,000. That leaves a gap of £20,000 for men and £35,000 for women, even with relatively modest spending assumptions.
The issue is particularly acute for women, who tend to retire with smaller pension savings than men. Average pots are often around £50,000 — barely enough to sustain even a 17-year retirement. With the true requirement closer to £120,000, many face a shortfall of £70,000, potentially leaving them heavily dependent on state support.
Women also often contribute less to pensions earlier in their careers due to breaks for caring responsibilities or lower earnings. While Carmichael notes that many women increase contributions later in life to make up ground, “these contributions are generally not high enough”.
